Global BPO biz may slow to 2% growth

CHENNAI: Global business process outsourcing sector is likely to see only a modest growth of 2% in 2007, after growing at a compounded annual rate of 14% during the last five years, going by some of the recent indicators, according to a senior industry observer.

Mr Indraneel Banerjee, project director, Technology Partners International, a sourcing advisory firm, said the first quarter of 2007 saw the lowest number of contracts signed since the first quarter of 2003. The contract value was also the lowest since the third quarter of 2002.

There was also a shift away from large multi-process BPO agreements to single function contracts of a smaller size, he said. He was speaking at a seminar “The Changing BPO Landscape: Can India become a knowledge services hub?” organised by Nasscom on Wednesday in Chennai.

While TPI saw a softening of growth in BPO globally, it was positive about the potential of knowledge services outsourcing in India. Mr Banerjee said, “Contrary to the first wave of outsourcing, which was based on data transactions, the focus now is adding business value to a client, to enable their entry into new markets. Innovation is the key factor in knowledge-centric outsourcing”

Mr Lakshmi Narayanan, chairman, Nasscom, and vice-chairman, Cognizant Technology Solutions said that often BPO companies move up the value-chain driven by demand that comes from customers. In response, they build the capabilities to service those demands. BPOs also move up the value-chain by proactively coming up with solutions.

In a customer-driven model, pricing is usually based on (full time employees) dedicated to the project. In the competence-driven model, BPOs had a greater flexibility in pricing. Here, pricing could be based on the value added to the business, he said.

The seminar witnessed participation from offshoring companies like HP BPO, Ajuba Solutions India, Scope International and Pangea3 Legal Database Systems. The speakers contended that though the KPOs offer immense potential for India in the out-sourcing industry, this innovation-driven model would require a high degree of investment in domain and process capability and also employees with specialised skill-sets.

Also, the pricing model would move from being resource-based to value-based. The KPO sector also faces challenges like security, innovation and attrition. Security was especially a matter for concern among players in healthcare and the legal outsourcing arena.

Mr Devendra Saharia, president, Ajuba Solutions said, “Apart from financial data, we also deal with patient details, which is highly sensitive. In healthcare, R & D productivity is the key rather than the earlier phase where it was only claims processing.”

Nasscom has chalked out initiatives to help IT/ITES tackle. Mr Lakshmi Narayanan said, “We encourage educational institutions and industries to develop a finishing school-oriented programme. Apart from encouraging entrepreneurial activity, this would also act as an effective interface between the academia and industry.”